Monthly Treasury Average Index - MTA Index

Definition of 'Monthly Treasury Average Index - MTA Index'


The 12-month moving average of the one-year constant maturity treasury (CMT) used as an index for adjustable rate mortgages. The index is calculated by adding the 12 most recent monthly CMT values and dividing by 12. Since the MTA index is a moving average it has a lag effect. In other words, when the 12 monthly CMT values used to calculate the average are sequentially increasing, the current MTA value will not be as high as the current CMT value, and visa versa when the CMT values are sequentially falling.

Investopedia explains 'Monthly Treasury Average Index - MTA Index'


Some mortgages, such as payment option arms, offer the borrower a choice of indexes. This choice should be made with some analysis. The interest rate on an adjustable rate mortgage is known as the fully indexed interest rate - it equals the index value plus the margin. While the index is variable, the margin is fixed for the life of the mortgage. Different indexes have relative values which historically are quite constant within a certain range. For example, the MTA index is typically lower than the one month LIBOR index by about .1% to .5%. When considering which index is most economical, don't forget about the margin. The lower an index relative to another index, the higher the margin is likely to be.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an 80% loan-to-value ratio, the second position lien has a 10% loan-to-value ratio and the borrower makes a 10% down payment. 80-10-10 mortgage transactions are piggy-back mortgage transactions, and are frequently used by borrowers to avoid paying private mortgage insurance.
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium.
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
Trading Center